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HOW NEW APPROACHES TO USER VERIFICATION CAN HELP BANKS TACKLE THE ISSUE OF FRIENDLY ACCOUNT TAKEOVER

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By Richard da Silva, VP EMEA at Revelock

 

Banks and other financial institutions are battling hard behind the scenes every day to ensure online fraud attacks are detected and prevented efficiently and effectively. This has become an endless game of cat-and-mouse, with fraud analysts struggling to keep up with what is now a massively lucrative industry populated by increasingly sophisticated bad actors. Meanwhile, financial organisations often err on the side of convenience over security, so as not to add friction to customer journeys.

The complex issue of accurately detecting and responding to one type of ‘account takeover’ in particular – namely friendly account takeover – encapsulates the difficulties of balancing a comprehensive fraud defence with a seamless customer experience.

 

What is friendly account takeover?

Friendly account takeover refers to a circumstance in which a friend or family member helps the account holder with their online banking. It’s important to note that this is different from a generally used term, ‘friendly fraud’, through this distinction: although technically the friendly account takeover is not the legitimate customer, their actions in taking over the account involve no malice. This can be tricky for financial institutions to navigate, because in their perpetual search for ways in which to offer a frictionless user experience, banks don’t want to impose unnecessary restrictions on those friends or family members who have no intention of stealing money and committing fraud.

Instances of this type of harmless account takeover spiked during the pandemic due to the increase in online banking use, especially among users who were inexperienced in using digital services previously. Unfortunately, this influx of new online users is one of the very trends that enticed fraudsters to increase their criminal activities even further during the crisis; in the first half of 2020, complaints of fraud in relation to digital transactions increased by 59%. A rise in friendly account takeover among legitimate users and their friends and family, as well as an increase in malicious attacks means banks were caught between a rock and a hard place in terms of trying to make a distinction between the two in order to both mitigate fraud as well as to maintain a frictionless experience for legitimate customers.

 

Richard da Silva

The issue with traditional fraud prevention solutions

Implementing an online fraud solution is the most accurate way in which to determine whether a user is who they say they are and whether they are being manipulated or impersonated throughout their online session. However, this typically won’t solve the problem here. Financial institutions will be able to establish that the user is not the person with their name on the account, without determining whether the impersonator is a bad actor or a helpful family member. One way to solve this may be triggering stepped up authentication for any user who is not who they say they are, but not only does this add friction for those users who are not attempting to commit fraud, simultaneously it risks letting perpetrators of phishing, remote access trojan (RAT) or other types of attack as well as of friendly fraud slip through the net, leading to fraud losses.

What’s more, traditional fraud prevention methods involving behavioural biometrics most often leverage a profiling technique that compares individual user behaviour to that of groups of bad actors, an approach that inevitably leads to false positives. An increase in alerts produced by detecting friendly account takeover and false positives is also bad news for fraud teams, as it means they will have less time to focus on legitimate threats, as well as other high-value tasks such as identifying mule accounts and tracking down ‘mule-herders’.

 

A new approach to tackling friendly account takeover

Fortunately, a new approach to behavioural biometrics-based fraud prevention can help remediate this tricky issue. Part of this approach involves profiling users in a slightly different but crucial way. Instead of comparing them to bad actors, behavioural biometric analysis can be used to constantly analyse every user’s unique behaviour, such as the speed and pressure with which they type on their device. The data from this analysis can then be used to create a unique digital ID for each online customer, called “BionicID”. This allows fraud analysts to compare every individual user’s current behaviour to their own past behaviours instead of clusters of ‘bad’ users, and from this detect any anomalous behaviour as potential fraud. This analysis can also be used to attribute a ‘risk’ assessment to each alert, which will help fraud teams quickly decide on the most appropriate response.

In short, whilst the traditional profiling method asks users “Are you a bad actor?”, this new approach instead asks “Are you really you?”. Employing this more granular method of profiling means the introduction of an automated detection and response process can then effectively filter out circumstances of friendly account takeover. Using ‘active defence’ technology, institutions can configure automated alerts and responses to threats based on their risk-level, as provided by the continuous behavioural biometric analysis of each user.  In order to effectively tackle friendly account takeover, fraud analysts can configure this automated system to treat anomalous behaviour detected when friends or family are helping account owners as low risk. An automated response for this could then be set accordingly.

Additionally, a solution involving artificial intelligence and deep learning capabilities will recognise the usual operations of the account to an extremely high degree of accuracy; if someone is helping their grandfather access his online banking services regularly, the bank will remember this as benign behaviour and will not trigger any stepped-up authentication.

Using this combined approach of an automated process based on behavioural biometrics and assessed risk ensures that financial institutions need not take any unnecessary action while still protecting customers. At the same time, it does not allow actual fraud to slip through the net, as all activity is still detected, alerted, and responded to depending on fraud analysts’ configurations.

 

Business

THE ACCELERATION TOWARDS A MOBILE FIRST ECONOMY

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By Brad Hyett, CEO at phos

 

Over the last year, we have seen a big shift towards contactless payments. Fuelling this has of course been the coronavirus pandemic, which has made the public hesitant to handle cash due to the health concerns.

As multiple national lockdowns forced physical stores to close, and customers demanded easy, cash-free payment options, merchants had to quickly adapt. The result? An increased provision of pay and collect services.

In the UK alone, 83% of people use contactless payments according to data from the Office of National Statistics.

So it’s vital that merchants are equipped with the most efficient payment solutions, as the UK heads towards a mobile-first economy.

 

Proliferation of contactless payments

In 2020, 90% of UK card payments were contactless. This equates to an increase of 12% on the year prior, despite the total number of payments made falling by 11% from 2019 to 2020. Moreover, the affordability of smartphones has increased significantly over the last decade. And it’s estimated that 84% of UK adults now own one.

We’re Seeing merchants embrace more efficient and cost effective payment methods in response. While physical payment terminals are often too expensive for many small businesses, software point of sale, or SoftPoS, enables merchants to turn hardware that they already own – i.e. their mobile device – into a point of sale terminal.

With merchants increasingly adopting these innovative technologies, contactless payments will continue to gain popularity among the general public. In 2020, 13.7 million people in the UK either didn’t use cash at all or only used it to make a single purchase. That’s double the same figure from the previous year.

 

Changing consumer demand

Now more than ever, consumers are aware of how innovative payment solutions can add efficiency to their daily lives. As such, consumers now demand better payment services, including reduced queuing times, checkoutless stores, and bespoke loyalty schemes.

Businesses such as Mercedes offer an end-to-end digital car purchasing service, so customers can go through the whole car purchasing journey from the comfort of their own home. This includes car deliveries, financing, insurance and more.

Meanwhile, eCommerce giant Amazon has started trialling checkoutless ‘Go’ stores, speeding up the shopping experience by eliminating the queuing process altogether. The days of waiting for a table at a restaurant are also over, as more people have grown used to booking in advance.

Hence, it’s important that we empower small businesses to remain competitive and provide them with the payment solutions to meet customer demand.

 

Global transformations

The digital payments revolution isn’t slowing down anytime soon. By 2026, only 21 percent of transactions will be made using cash.

The US might have been slow out of the gate, but it’s starting to see increased adoption of mobile payments. In-store mobile payments grew by 29% in the States last year alone.

This growth was primarily fuelled by Gen Z-ers and millennials. Latest projections show that there will be 6 million new mobile wallet users by 2025, with millennials accounting for 4 million of this figure. These two generations, the former in particular, have grown up with mobile banking.

For most Gen Z-ers, their first foray into financial services was with a challenger bank like Starling or Monzo. These banks are able to offer online features such as ‘split the bill’, fee-free withdrawals abroad and much more to cater to the modern financial needs of the younger generation.

The Middle East experienced similarly sharp increases in contactless payments. From 2019 to 2020, there was a 200% growth in contactless transactions. This shift towards a mobile-first economy in the region was inevitable; the pandemic merely accelerated this shift. A recent study showed that 80% of people living in the Middle East planned to continue using contactless payments post-pandemic, with speed and security being the main draw.

 

The future is mobile

As parts of the world now start to come out of lockdown, there’s an openness to new solutions and a widespread acceptance of new technologies.

It is now a case of when, rather than if, we’ll see a permanent shift to cashless in the future. For businesses, embracing digital innovation will be key to remaining competitive and keeping pace with consumer demand in this fast-changing payments landscape.

 

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HOW MERCHANTS CAN IMPROVE THE ONLINE PAYMENTS EXPERIENCE

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By Alan Irwin, Senior Director of Product at Global Payments UK

 

The dramatic increase in online shopping over the past 18 months has encouraged many businesses to invest in developing their omnichannel shopping experiences. The reasons vary – some are keen to capitalise on the trend of older shoppers migrating towards ecommerce and some are trying to make up for loss of sales in brick-and-mortar stores during the pandemic. It is also true that many businesses are shifting their models to sell direct to consumers to avoid high marketplace fees and are therefore building their ecommerce channels for the first time.

The checkout experience is arguably the most important and delicate part of the ecommerce transaction, as it can make the difference between a happy customer likely to return, and a shopping cart abandoned out of frustration and confusion. A survey from March 2020 suggested that 88% of online shopping orders were abandoned, i.e. not converted into a purchase. A seamless, customer-centric online payment experience is therefore critically important in ensuring completed transactions. But with so many payment providers available, what should businesses be looking for when trying to keep friction to a minimum?

 

Keep clicks to a minimum

Less touchscreen interaction equals less abandonment. Adapting the payment page to fit any device and supporting popular mobile digital wallets like Google Pay ensures a seamless, stress- and hassle-free checkout experience for the customer and keeps clicks to a minimum. Friction can present itself in the most minor features – for example, when the customer is navigating the payment form, the appropriate keypad should be shown to the customer when required. It’s much easier to enter a card number using the dial pad instead of switching between QWERTY keypad layouts.

Simplifying online forms with autofill and tokenisation also significantly reduces friction at checkout and shortens necessary time taken. Ensuring checkout forms are tagged correctly for “autofill” is a great way to offer customers a single-click to input the payment, shipping, and billing data that they have stored in their browser profile. Similarly offering a guest checkout option will help convert customers who are in a hurry or looking for a one-off purchase. This can also be achieved by offering to store the payment details (called ‘tokenisation’) for express repeat and one-click purchases.

 

Make it easy to understand

A tailored payments approach can increase both domestic and international global sales. By offering a checkout experience in the customer’s language, the option to pay in their currency of choice, and use their preferred method of payment (whether it’s PayPal, Alipay or card), businesses can build loyalty quickly and put customers at ease. It is equally important for merchants to ensure they always display simple direction and information about next steps to instil confidence and prevent customer drop-off. The customer should be informed of what is happening at every stage in the process, for example, whether they will proceed to SCA (Secure Customer Authentication) next or go straight through to completion.

In addition, validating forms in real-time means merchants can highlight potential errors to the customer early on, and payment providers should provide this functionality. This could be an invalid expiry date, an incorrect digit in the card number or incorrect CVV number based on card type. When issues are only flagged at the end of the process, this forces the customer to go back through the steps to figure out the error. Real-time signposting of problems removes this potential friction and reduces the potential for a declined transaction.

 

Ensure seamless security

Merchants should work with a payment partner who offers the right blend of security and compliance management without it coming at a cost to the end-to-end checkout experience for the user. Instilling trust and security in your checkout flow while utilising the right solutions to drive seamless authentication flows will increase customer confidence and help prevent drop-off.

The greatest level of security and control comes from either utilising hosted payment fields that the
merchant can natively integrate into their checkout flow, or a hosted payment page where they can
manage the look and feel. Showcasing your brand on the checkout page with trust signals and logos also adds to building trust with the customer.

Staying ahead of regulations is also important. Secure Customer Authentication (SCA) will soon be mandatory in the UK for all eligible digital transactions, and this doesn’t have to be a friction-full process. Tools like Transaction Risk Analysis (TRA) and Exemption Optimisation Service (EOS) can quickly score transactions and drive exemptions where there is the right blend of transaction risk.

 

The devil is in the details

These three rules for successful ecommerce checkout experiences may seem straightforward, but it is important to apply them at a micro level. It can take only one minor point of friction to cause a customer to abandon their cart, and this will inevitably be replicated across other similar customers. It is critical to identify friction points early on and anticipate customer needs throughout the process. Discussing these points and any opportunities to improve customer checkout experience with your ecommerce team and payment provider is an important first step towards ensuring your entire shopping experience remains competitively seamless and loyalty is won. It may be that your payment provider cannot address them, in which case it could be time to move on in order to stay competitive.

 

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